The impact of inflation on long-term housing loans

The extension of long-term loans, e.g. to finance housing, is adversely affected by inflation. For one thing, the higher nominal interest rates charged by the banks in response to inflation mean that borrowers have to ma
The extension of long-term loans, e.g. to finance housing, is adversely affected by inflation. For one thing, the higher nominal interest rates charged by the banks in response to inflation mean that borrowers have to make (nominally) higher interest payments, which unnecessarily reduces their borrowing capacity. For another, long-term loans with variable interest rates increase the probability that borrowers will become unable to meet their payment obligations. The present paper examines these two assertions in detail. At the same time, it presents a concept for substantially reducing the weaknesses of conventional lending methodologies. We start by investigating the consequences of a stable inflation rate on the borrowing capacity of credit clients, then go on to analyze the impact of fluctuating inflation rates on the risk of default.
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Metadaten
Author:Ingo Tschach
URN:urn:nbn:de:hebis:30-18498
Parent Title (English):Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 55,3
Series (Serial Number):Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting (55 3)
Publisher:Univ., Fachbereich Wirtschaftswiss.
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2000
Year of first Publication:2000
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/10/11
SWD-Keyword:Inflation; Langfristiger Kredit; Unbewegliche Sache
Source:Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting ; 55 Teil 3
HeBIS PPN:199065829
Institutes:Wirtschaftswissenschaften
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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